In the 1936 case of New York ex rel. Whitney v. Graves et al., the U.S Supreme Court ruled on a matter concerning interstate commerce and taxation laws. The appellant, Gertrude Vanderbilt Whitney, was a resident of New York who owned securities in corporations doing business both within and outside the state but had no office or place of business in Vermont where she also maintained a summer home. She challenged Vermont's right to tax her income derived from these out-of-state businesses under its personal income tax law. The court held that such taxation did not violate either due process clause or interfere with interstate commerce as prohibited by the Constitution; it was not an attempt to regulate interstate commerce nor impose any direct burden upon it. It further stated that there is nothing inherent in our federal system which prevents states from taxing residents' incomes wherever earned unless Congress determines otherwise. This decision upheld Vermont’s right to levy taxes on Mrs.Whitney's out-of-state earnings based on her status as a part-time resident, setting precedent for how states could apply their individual income tax laws regarding non-resident citizens earning money across state lines.

In the dissenting opinion for New York ex rel. Whitney v. Graves et al., Justice Cardozo disagreed with the majority's ruling that a state could tax income derived from another state's bonds, arguing it violated principles of intergovernmental tax immunity. He contended that if one state can levy taxes on securities issued by another, then states have power to burden and obstruct each other’s borrowing capacity which is against the spirit of unity among states in a federal system. He further argued that such taxation would lead to retaliatory measures between states and ultimately harm national harmony and economic stability within the federation.